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Air Cargo Industry Is Not Facing Same Problems Afflicting Passenger Airlines
Airline Business Report June 22, 2005 12:00am Airline Business Report via NewsEdge Corporation : In sharp contrast to most of the airline industry, air cargo companies are off to an impressive start in 2005 and are poised to have a banner year. All of the air cargo companies surveyed by Airline Business Report had profits in the first quarter, and with the exception of one company, those profits were above the same quarter in 2004. The story is quite different for U.S. passenger airlines. Legacy carriers showed a loss for the first quarter, and most of the losses were worse than the same quarter in 2004. Several low-cost carriers had first quarter losses as well (ABR, May 9). EGL Inc. [EAGL] is the air cargo company that did not exceed its first quarter 2004 profits, but the difference was slight. It was bogged down by high fuel costs, yet gross revenues still increased 20 percent. Randy Martinez, CEO of World Air Holdings Inc. [WLDA], characterized the company's first quarter as "outstanding." On April 27, it acquired North American Airlines, which presumably will expand commercial contracts. The first quarter financial results do not include North American. "Not only will North American be accretive to earnings this year, but we also expect immediate cost savings associated with aircraft insurance and other synergies," he said. World Airways, a wholly owned subsidiary of World Air Holdings, is a U.S.-certificated air carrier providing services for major cargo carriers, the United States military, international freight forwarders and leisure tour operators. During the first quarter, the company continued to provide a high level of flying for the Air Mobility Command (AMC), signed two new commercial customers, and generated strong operational results, evidenced by a nearly 16 percent rise in block hours. UPS Inc. [UPS] says its good first quarter bodes well for the second quarter. "The first quarter set the pace for UPS to generate earnings in 2005 at the higher end of our historical range," said Scott Davis, the company's chief financial officer. "We grew our international operating profit by more than 25 percent and we did a very good job of managing our costs." The U.S. next day air service brought in $1.5 billion in revenues in the first quarter compared to $1.48 billion the year before. The average revenue per piece of U.S. next day air service was $20.45, up from $19.78 in 2004. Consolidated revenue for the three months ended March 31 rose 10.8 percent to $9.89 billion, reflecting in part the addition of revenue from the recently acquired Menlo Worldwide Forwarding. International package revenue climbed 13 percent while U.S. package revenue rose 2.8 percent. Export volume was up 9.3 percent. Expeditors International of Washington Inc. [EXPD] also is happy with its first quarter results. The company managed to expand its operating margin, saying that is "no small feat" given that the first quarter of 2004 was exceptionally strong. Net revenues for first quarter 2005 were $230.7 million, compared with $202.4 million for the first quarter of 2004. This quarter's net revenue growth, measured year-over-year, was pretty much uniform across all its products. Dynamex Inc. [DDMX], a leading provider of same-day delivery and logistics services in the United States and Canada, says its latest quarterly results were measurably better than a year ago. (The company's quarter ended April 30 instead of March 31. Its fiscal year began August 2004, and this was the third quarter for fiscal year 2005.) In addition to across-the-board improvements in its quarterly financial results, Dynamex reduced long-term debt by $2 million to $3.8 million. The company expects year-over-year sales growth of between 9 percent and 11 percent for fiscal year 2005. The gross profit margin is expected to improve slightly in the fourth quarter from the current level as the company implements a number of cost reduction measures. The company expects FY 2005 net income to range from $0.96 to $1.01 per diluted share. ABX Air Inc. [ABXA] did a lot more business in the first quarter. The number of packages handled totaled 160.6 million, a 30.8 percent increase compared to first quarter 2004 volume. Under agreements with DHL Express, ABX Air has the potential to collect revenues from an incremental mark-up each quarter based on cost-related goals. During the first quarter of 2005, ABX Air earned $0.6 million or 46.5 percent of the maximum incremental quarterly mark- up. DHL is making a significant investment in ABX Air's main Ohio sort hub and in several of its regional hubs. Earnings from non-DHL business increased to $2 million, up 55.6 percent as compared to the first quarter of 2004. The increase was primarily the result of an increase in the level of aircraft maintenance services and parts sales as well as revenues associated with ABX Air's operation of a U.S. postal hub, which the company has operated since September of 2004. Atlas Air Worldwide Holdings Inc. [AAWWV.PK], which emerged from Chapter 11 bankruptcy protection in July 2004, expects a pretax profit for the first quarter and pretax earnings for the full year above the $68 million target in the company's creditor plan. It expects demand for widebody freighter aircraft to exceed supply throughout 2005. For the first quarter, it expects pretax income of $3 million to $8.5 million on revenue of $346 million. President and CEO Jeffrey Erickson said the first quarter is traditionally the slowest part of the business year. "Looking ahead, current business and economic forecasts lead us to expect continued improvement in our quarterly results over the balance of the year, with business conditions peaking on a seasonal basis in the September to mid-December time frame," he said Atlas Air expects to report operating income for the first quarter of 2005 in the range of $22 million to $27 million compared with an operating loss of $22 million in the first quarter of 2004. Atlas Air's principal business is the airport-to-airport transportation of heavy-freight cargo. Its fleet of 43 Boeing [BA] 747 freighter aircraft operates throughout the world, providing air cargo and related services. AirNet Systems Inc. [ANS] said its point-to-point surface shipments and air charters increased approximately $1 million and $0.8 million, respectively, in the first quarter. Passenger charter revenues increased to $9.3 million for the first quarter from $3.7 million for the same period last year. Jetride Inc., a wholly owned subsidiary, operated 16 aircraft as of March 31 compared to 11 aircraft on the same date in 2004. The company conducts its business in two segments, delivery services and passenger charter services through Jetride. First quarter revenues benefited from the net addition of five aircraft to Jetride's fleet during the past 12 months, a 116 percent increase in flight hours and higher average revenue per flight hour. Passenger charter services revenues rose to 18.7 percent of total net revenues for the first quarter, from 9 percent for the same period in 2004. Aircraft fuel expenses, which the company tries to recover through fuel surcharges, increased about $2.7 million for the first quarter. On May 4, AirNet's board of directors unanimously authorized Brown Gibbons Lang & Co. (BGL) to solicit offers to acquire the company. BGL is the investment banking firm retained to analyze the AirNet's "strategic alternatives to enhance shareholder value." >>>>Contacts: Steve Forsyth, World Air Holdings, (770) 632-8322; Norman Black, UPS, (404) 828-7359; Jordan Gates, Expeditors International of Washington, (206) 674-3427; Dallas Ray Schmitz, Dynamex Inc., (214) 561-7503; Quint Turner, ABX Air Inc., (937) 382-5591; Alan Caminiti, Atlas Air Worldwide Holdings, (914) 701-8400; James Crane, EGL Inc., (281) 618-3100; Eden Prairie, C.H. Robinson Worldwide Inc. (952) 937-7779; Gary Qualmann, AirNet Systems Inc., (614) 532-4072.<< [Copyright 2005 Access Intelligence, LLC. All rights reserved.] <<Airline Business Report -- 06/22/05>> << Copyright ©2005 Access Intelligence, LLC. All rights reserved. >> © 2005, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved. http://www.manufacturing.net/scm/art...ndustryid=2380 |
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